Dollar weakness continued with the DXY declining sharply while gold hit a new record at $2900oz. The psychological $3000 level is now within sight as spot gold is snapped up as a “universal hedge” against tariffs, trade wars, inflation/disinflation and geo-political tensions.
The dollar index declined around 0.5% to 107.5 and is now 2.5% below the January peak. Gold made a new intraday record high touching levels just above $2900oz. Other PGMs rose with silver adding +0.5% to $32.32. Platinum led the PGMs with a 1.8% gain to $986oz. Copper lifted 2% to $4.44. Base metals were firmer.
a report surfaced on Wednesday that highlighted that Russian consumers purchased 75.6 tons of the precious metal last year, representing a 6% jump from 2023 and a 62% increase from 2021, right before the war in Ukraine broke out. Russians are piling up record amounts of gold as surging inflation and strict sanctions weigh on the value of the ruble both domestically and internationally.
The value of the Ruble has collapsed in the wake of the Ukraine invasion. Following the rally in ’22 that followed the invasion the Ruble has continued to depreciate in Russia with inflation running at nearly 10%.
An escalation of Western sanctions against Russia has made gold an attractive hedge and alternative to traditional investments. Sanctions have also made it more difficult for Russian citizens to diversify their investments outside the country due to cross-border payment restrictions. Additionally, while Russia’s central bank hasn’t been purchasing as much gold as in the past (with capital reserves flowing to the war effort), it was once the world’s largest gold buyer before the war but has since been displaced by China and many other nations. Russian consumers are likely not the only buyers, with populations around the world “rediscovering gold as a hedge” against the turmoil going on in global FX markets.
Gold made a new record high just above $2900oz on Wednesday. The scope is now open for a run at the psychological $3000oz level in the coming weeks. The consolidation phase that occurred after the US election is now complete, with upward momentum resuming.
A$ spot gold made a new record high above A$4600oz. Domestic investors are going to find the Aussie gold mining sector increasingly difficult to ignore, given the huge margins many companies are now generating. I expect corporate activity to heat up this year with it being cheaper to “buy than build”. The sector is still widely under-owned in Australia (and globally) but this could soon change.
Carpe Diem!
Angus
Disclosure: Fat Prophets and its affiliates, officers, directors, and employees may hold an interest in the securities or other financial products relating to any company or issuer discussed in this report. Fat Prophet’s disclosure of interest related to Investment Recommendations can be provided upon request to members@fatprophets.com.au.
Chart Source: Thomson Reuters
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